retiring in vancouver

This is a guest post from Amanda who has an inspirational financial story to share.  Their single-income family of four currently lives in Vancouver and building wealth through the traditional methods of saving and investing.  Here is their journey towards financial freedom by the age of 50.

When FT asked if I’d like to share our story, I jumped at the opportunity. I hope that in sharing our journey to financial independence, I’ll have more opportunities to connect with and learn from other readers of the MDJ blog.

Who are we?

We’re a regular middle-class Canadian family living in a nearby suburb of Vancouver. We own our house and two cars. We enjoy one long vacation and a few weekend getaways each year. I’ve been at home with our sons since they were born, and we’re on track for financial independence before age 50 (in about 7 years.)

Related: How we save money on vacations.

How did we get here, with no lottery wins, inheritances, or high-paying corporate jobs to thank? Read on to learn about the key factors in our financial successes.

Factor 1: Strong foundations

My husband and I were fortunate to have been raised by frugal, hardworking parents. They immigrated to Canada in the 60s with next to nothing and spent a lifetime working and saving hard to give their children brighter futures. For most of their working careers, our parents were low to middle-income earners. They knew the value of money and how to make a dollar stretch. This is one of the critical factors in our financial success – we had a strong foundation in the example our parents set for us.

Through our childhood years, our parents squirreled away all our Child Tax Benefits, birthday and Christmas money. They wanted us to one day have a nest egg to put towards a big life goal, and that’s exactly what we did. Those nest eggs eventually became about a third of the down payment on our house.

Factor 2: Fear of debt

In his TEDx talk, Preet Banerjee says we need to bring back the fear of debt, particularly consumer debt. Our parents always held this belief and put a healthy fear of debt into us. In fact, they took this to another level and taught us to fear “good” debt (a mortgage) just as much as “bad” debt (credit cards). They showed us how much of our hard-earned money was going towards the interest on our mortgage, and how little (in the early years) goes towards the principal. This was a vivid lesson in how debt can whittle away at your savings.

Because of this, we’ve never had any form of debt outside of our mortgage – no credit card balances, car loans, or HELOC. We avoid debt like the plague, and as a result, most of our money has been working for us instead of some big bank.

Factor 3: House hacking

House hacking is a newish term that refers to homeowners who minimize or eliminate their housing costs by renting out portions of their home. While this term didn’t exist when we bought our home, the house hacking concept was definitely well-known. In those days, it was referred to as a basement/ secondary suite or mortgage helper.

Part of our parents’ financial successes was due to “house hacking” in their early years of home ownership. When it came time for us to buy a house, our parents strongly encouraged us to look for a house with a rentable basement suite.

We looked at over 50 properties before we finally found our dream home – and it had a large, bright basement suite. With this suite, we now had a portion of our house ready to work for us. We could either rent it to tenants or host international students – both were choices we were happy with.

Factor 4: A side hustle

We’d initially considered renting our suite to a tenant but decided instead to try hosting international homestay students. We’d heard wonderful things about hosting students from other homeowners and it sounded like a great fit for us.

Hosting students have been a life-changing experience and it has enriched our lives in so many ways (that go far beyond the monetary benefits). We’re very thankful to have had the opportunity to meet and learn from so many students from all over the world.

As a stay-at-home mom, hosting students has been a perfect side hustle. It feels good to contribute to our family income without having to leave my kids to do it. The hours are flexible and the work fits our daily lives (a little more cooking, cleaning, and laundry – no big deal!)

Very few families we know take advantage of this hybrid of house hacking/side hustle, but perhaps some of you will consider it now.

Factor 5: Frugal spending

I started typing a list of things we do to spend frugally, but FT’s already done it! Here’s his list: https://milliondollarjourney.com/25-ways-i-save-money.htm. It’s remarkable how similar our lists are – so no point in repeating it all here.

Factor 6: High savings rate

Anyone in the FI community knows that your time to financial independence is linked more to your savings rate than to your income level (the higher percentage of income you save, the faster your path to FI.) This year, we’re on track to save about 55% of our income. We weren’t always able to save this much due to our lower incomes when we were starting out. But we’ve been quite good at resisting lifestyle inflation, so our savings rate has increased with each passing year as my husband’s salary has increased.

Factor 7: Be different

This factor is key when living in a high cost of living area. In such areas, you’ll likely be surrounded by people who have the means (or the credit limits) to spend easily. Fancy cars, trendy furnishings, and luxury vacations are the norm. While I’m not judging any of these choices, to reach FI at a younger age, you have to see these things as choices – not must-haves. You do not need to follow the crowd.

Having financial independence as a goal is kind of like a super-power. It gives you intense motivation and drive to resist the pull of lifestyle creep, and makes it easy to “be different.”

Putting it all together

Now you know how we got here – let’s look at some numbers to give it more context. Our annual spending is about $45,000 for all expenses except travel. I budget $8,000/year for travel (usually it’s less, sometimes it’s a little more). That’s a total of $53,000/year, so we’ll need $1.325 million in investable assets to reach financial independence (25 x $53,000).

However, I feel more comfortable with a $60,000 annual budget to allow for future large expenses (car replacement/home maintenance/out-of-pocket medical and dental costs.) To meet that goal, we’ll need $1.5 million of investable assets to reach financial independence (we are currently at $650k investable assets).

“Wait!”, some of you might say. “If you’re saving 55% of your income, and you’re spending $53,000/year, you DO have a high-paying corporate job!” True, that is the case NOW. But this wasn’t the case for most of our lives. A large portion of our savings came before my husband attained his new, higher salary. (In fact, that could be yet another factor in our financial success – do well at your career and work hard towards career advancement and pay raises.)

In closing

I hope our story shows that you don’t have to be special or receive a windfall to reach financial independence. I do realize that housing costs in areas like Vancouver will change the journey for those just entering the housing market – you’ll have to be more creative in your housing choices. However, the steps we took to increase our income and savings can still help to move you in the right direction. 

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